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By Catholic Online (NEWS CONSORTIUM)

12/20/2012 (3 years ago)

Catholic Online (www.catholic.org)

Many disgruntled people have dubbed the company 'Government Motors'

General Motors, that venerable symbol of American automotive excellence, will be saved from certain insolvency thanks to the U.S. government - but it will cost taxpayers dearly. According to the plan, General Motors will repurchase 200 million shares of its own stock currently held by the U.S. Treasury. The White House has announced plans to sell off its remaining 300 million shares within the next 12 to 15 months.

During a holiday event with reporters last week, CEO Akerson indicated his desire to have the government sell off its stake. He didn't give an indication that any move was imminent. Most analysts had not expected an announcement until sometime in early 2013.

During a holiday event with reporters last week, CEO Akerson indicated his desire to have the government sell off its stake. He didn't give an indication that any move was imminent. Most analysts had not expected an announcement until sometime in early 2013.

Highlights

By Catholic Online (NEWS CONSORTIUM)

Catholic Online (www.catholic.org)

12/20/2012 (3 years ago)

Published in Business & Economics

Keywords: General Motors, Government Motors, bailoout, taxpayers, U.S. economy


LOS ANGELES, CA (Catholic Online) - The car maker will pay $27.50 for the shares it will acquire, a 7.9 percent premium over the $25.49 closing price on December 18, 2012. This is a markedly sharp discount from the $33 price set during GM's initial public offering in November 2010. In either case, taxpayers will lose billions on the sale.

"This announcement is an important step in bringing closure to the successful auto industry rescue, it further removes the perception of government ownership of GM among customers, and it demonstrates confidence in GM's progress and our future," chairman and CEO of GM Dan Akerson says.

GM also noted that it will take a $400 million charge against earnings during the fourth quarter in connection with the stock repurchase.

During a holiday event with reporters last week, CEO Akerson indicated his desire to have the government sell off its stake. He didn't give an indication that any move was imminent. Most analysts had not expected an announcement until sometime in early 2013.

An issue that failed GOP presidential candidate Mitt Romney repeated frequently during his campaign was that the U.S. treasury has been under strong pressure to announce an exit plan. Romney called on the White House to sell off its stake last summer, though at that point GM was trading as low as $18.72 a share.

At that price, the government would have received about $1.5 billion less than it will now get a total of $5.5 billion for the initial 200 million share sell-off.

Industry analysts had estimated a sale price of $53 would be needed to recoup the government's full investment in General Motors, however.

Both parties have sought a way to sell off the government's remaining stake in "an orderly fashion." There was clear concern that simply dumping 500 million shares onto the market all at once would cause major disruption and sharply depress GM's stock price.

Insiders suggest that the most likely outcome would be the remaining 300 million shares will be sold off in chunks, rather than en masse, to minimize any market disruption.

As the U.S. economy continues to improve, with auto sales expected to continue rebounding after a strong close to 2012, there are hopes that GM's share price will continue its upward momentum.

The bailout has proved extremely controversial, far more than the much larger rescue of U.S. banks. GM officials have acknowledged that their research shows some potential buyers won't purchase products from what has been derisively called "Government Motors." It's unclear if the planned sell-off of stock will overcome that aversion.

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Pope Francis: end world hunger through 'Prayer and Action'


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Pope Francis Prayer Intentions for February 2016
Universal:
That prisoners, especially the young, may be able to rebuild lives of dignity.
Evangelization: That married people who are separated may find welcome and support in the Christian community.



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